India unveils reform-driven budget


Indian Finance Minister Yashwant Sinha said his 2002-03 budget would deepen the reform process

CNN's Shishir Joshi

MUMBAI, India (CNN) -- India's Finance Minister Yashwant Sinha has pledged to forge ahead with economic reforms by shedding government staff and selling off state-owned companies.

Sinha, presenting the Indian government's budget for the year starting April, also announced a 4.8 percent increase in defense spending to $13.8 billion.

In his previous "dream budget" unveiled in February last year, Sinha had lifted military spending by a whopping 13.8 percent.

That triggered widespread protests from neighbouring Pakistan that India was fuelling a South Asian arms race.

"This is a budget for consolidating, widening and deepening the reform process. It is a budget devoted to development," Sinha said in his annual speech to parliament Thursday.

Interest rates

Sinha's package of economic reforms included a cut in interest rates on small savings schemes and the slashing of subsidies to reduce a growing fiscal deficit.

India's deficit, estimated at 5.4 per cent this financial year, was also a major factor hampering growth, Sinha told parliament in a speech traditionally watched by millions across the country.

He announced the dismantling of state-controlled oil prices, and cuts in agricultural and other key subsidies, which he said were proving to be a drain on state resources.

India also plans to cut nearly 12,200 federal government jobs by the end of March 2002 out of an "identified surplus manpower of 42,200," according to Sinha.

India's industry captains were disappointed by Thursday's Budget.

"This budget is unlikely to boost higher growth rates," Sanjiv Goenka, president of the Confederation of Indian Industries (CII) said.

Sensex down


Mumbai's key stock index, the BSE Sensex, fell 3.9 percent Thursday

"It may at best sustain current growth rates. I would call it an achievable, deliverable budget," he said.

A similar reaction emerged from the capital markets, as the Sensex, the key barometer of the Bombay Stock Exchange (BSE), slipped 3.9 percent to close at 3,562.31 points.

"There is virtually nothing for the capital market in the budget proposal and no bold steps were announced," former Calcutta Stock Exchange (CSE) president Kamal Parekh said.

This is Sinha's fifth budget in a row. As analysts point out, it comes at a crucial juncture for his Bharatiya Janata Party (BJP), which heads India's coalition federal government.

Having emerged recently from humiliation in state elections, the coalition government is desperately trying to douse a bitter communal outburst which has left more than 100 people dead in the BJP–ruled western Indian state of Gujarat.

Tension erupted after a suspected Muslim mob attacked a train carrying Hindu activists in Gujarat on Wednesday, killing 58 people. That triggered deadly reprisals by Hindu rioters, who attacked and killed more than 46 Muslims in the city of Ahmedabad.